One-off tax could hurt investment, Chancellor warns

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The windfall tax could hurt investment in the North Sea, Chancellor Rishi Sunak has said.

The Chancellor unveiled the measure last month, after calls from Labor that it will impose a 25% surcharge on the profits of oil and gas giants.

The policy is hoped to bring in up to £5billion, but energy firms have warned it could damage the sector.

At a roundtable in Aberdeen on Thursday, Offshore Energy UK chief executive Deirdre Michie said she had pressed Mr Sunak on the issue.

“The energy profit tax is an unexpected new tax that changes the basis for investment,” she said.

“We had a frank and constructive meeting with the Chancellor to discuss these issues and our industry leaders were clear about their concerns, particularly the impact on investor confidence. Both parties are committed to continuing the discussions.

“We will work constructively with the UK government and do our best to mitigate the damage this tax will cause, but if energy companies reduce their investment in UK waters they will produce less oil and gas.

“That means they’ll end up paying less tax and have less money to invest in low-carbon energy.”

A consultation on the policy is due to end on Tuesday.

According to the Treasury, Mr Sunak stressed the importance of the sector to the UK’s transition away from fossil fuels, while stressing that the levy will provide tax relief on investment in the sector.

Andy Samuel, Chief Executive of the North Sea Transition Authority (NSTA), said: “We very much appreciated the constructive meeting – the tripartite between government, industry and the NSTA remains crucial for energy security. and reaching net zero.

“We welcome the consultation on the bill – it is crucial to get it right and more broadly to restore investor confidence and support important projects, including clean energy for offshore installations.”

A British government spokesman said: “As outlined in Britain’s Energy Security Strategy, and with Putin’s invasion of Ukraine illustrating the merit, North Sea oil and gas are going to be crucial for the UK’s energy supply and security for the foreseeable future – so it is right that we continue to encourage investment there.

“The tax’s investment allowance means companies will benefit from an overall tax saving of 91p for every pound they invest – this almost doubles the tax relief available and means that the more a company invests, the less tax she will pay.”

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